Latest Articles: Appears Undervalued

By Peter York, Published: July 27th, 2010 7:40 AM CDT

A quick comparison to search giant Yahoo! Inc. [NASDAQ:YHOO] and smaller advertising company ValueClick Inc. [NASDAQ:VCLK] suggests the tiny internet search and advertising company Corp. [NASDAQ:LOCM] is undervalued.

Yahoo! has as of late failed to impress investors and yet the stock price minus cash and investments – $8.37 - divided by earnings expectations for this year of .69 gives it a multiple of just above 12 times.  This is for a company that analysts predict will have 7% year over year growth in 2011.  ValueClick has a similar enterprise value of about $8.84 a share with analysts only predicting .59 earnings this year.  That’s an enterprise multiple of 15 times for a company that analysts predict will have 8% growth. appears to be flying under the radar with price minus cash of $6.75 as of close of business today (and that’s after rising a bit in the past week) and analysts predicting .72 (that number should go up to something around .75 after increased numbers were announced).  That yields a multiple of 9 or just above 9.  That’s with analysts predicting 17% growth the following year.  In addition, management yesterday emphasized that current 15% margins should improve in 2011.  Current 2011 analyst estimates assume a lower 14% margin.  If margins were to be more like 17%, for example, that would yield $1 earnings based on revenue estimates in 2011.  At Yahoo’s multiple, that would get $12.70 (plus the extra positive cash flow).  At ValueClick’s multiple, it’s $15.70, or more than double from current prices.  Those are 70% and 110% higher prices than the stock's current closing price.

The bottom line is that appears to be significantly undervalued given its earnings and growth.  The few analysts covering it appear to agree with price targets averaging at $12.50.  But investors are nowhere in sight as it sits in the mid 7s.  Look for the street to eventually come to its senses.

Disclosure: The author owns shares of

Related: YHOO, LOCM

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